Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
WEST BANK AND GAZA
FY 1997 FY 1998 FY 1999See footnote 1 Actual Estimate Request Economic Support Funds............. $75,000,000 $85,000,000 $75,000,000
Introduction
Following the September 1993 signing of the "Declaration of Principles on Interim Self-Governing Arrangements" (DOP) by the Palestinian Liberation Organization (PLO) and the Government of Israel, the U.S. Government committed to provide $500 million over a 5-year period (FY 1994-FY 1998). Of this total, USAID is administering $375 million; the remainder is to be provided through the Overseas Private Investment Corporation (OPIC). It is expected that USAID's $75 million annual budget will be extended through FY 1999. In September 1995, the Interim Agreement extended Palestinian self-rule to six major population centers in the West Bank, and elections were held in January 1996. Progress towards a final status agreement slowed after a series of suicide bombings in Israel and the change of government that followed the May 1996 Israeli elections. The January 1997 Hebron Accord included Israeli withdrawal from most of that city, but further redeployment actions lagged in the succeeding year. The U.S. Government, acting within its role as the primary facilitator for the overall Middle East Peace Process, has been actively engaged in defusing tensions and seeking compromises that are acceptable to both parties. USAID assistance to the Palestinian people, an essential element of this approach, supports U.S. interests in promoting regional stability, economic prosperity and adherence to democratic principles.
The Development Challenge
The USAID/West Bank and Gaza program responds to the economic and political challenges posed by the Palestinian-Israeli peace process, which is scheduled to conclude with a final status agreement in May 1999. The program is designed to promote long-term, sustainable development, which will ultimately determine the stability of the region regardless of the political formula that is accepted by the parties. Some of the basic constraints to carrying out an assistance program in the West Bank and Gaza include: deteriorated infrastructure; outdated or nascent legal, regulatory and institutional frameworks; limited natural resources; and restrictions on movement of goods and people. This latter factor is especially problematic. The World Bank estimates that constraints on cross-border movement of commodities and Palestinian workers, which followed several suicide bombings, resulted in approximately $1.3 billion in losses to the Palestinian economy between 1994-1996. The United Nations estimates costs between July and September of 1997 at an additional $113 million. These types of losses only underscore the fact that meeting the development challenge in the West Bank and Gaza will depend primarily on political solutions.
Immediately following the signing of the DOP, USAID support focused on the start-up of Palestinian Authority operations, high-priority infrastructure, employment generation, and economic reactivation. Beginning in FY 1996, resources have been concentrated in three strategic areas:
Mission Strategic Objective No. 1: Expanded Economic Opportunities . According to analysis conducted by the United Nations, real per capita GNP in the West Bank and Gaza fell from approximately $2,500 in 1992 to under $1,500 in 1996. Among other factors, this reflects the impact of limited employment opportunities as Palestinian access to jobs in Israel has been restricted subsequent to
terrorist attacks in Israel. Security measures also have reduced commercial activity. Currently, insufficient access to credit, limited markets, low productivity and inadequate infrastructure restrict the potential for economic growth--and therefore political and social stability--in the West Bank and Gaza. Donor programs designed to promote private sector development must be responsive to the special circumstances which define the Palestinian economy. These include the predominance of small and microenterprises (90% of businesses have less than 10 employees), the dependance on Israel for access to markets for labor and goods, and the absence of a transparent and comprehensive legal and regulatory framework. Through the year 2001, results of USAID's program will include: annual increases in employment levels of 8%, an increase in daily wages from approximately $16 in 1996 to $21.60 in 2000, and 5% annual increases in exports by assisted firms.
Mission Strategic Objective No. 2: Increased Access to and More Efficient Use of Scarce Water Resources.
Economically and developmentally sound water management practices are essential to sustainable growth. Water consumption rates are well below the World Health Organization's minimum standard, the inadequate supply of water is a limitation for both agricultural and industrial development, and only 25% of households are connected to sewage networks. In response to commitments within the Interim Agreement that assure Palestinians of access to an additional 70 million - 80 million cubic meters of water per year to meet immediate needs, the U.S. Government has played an active role as a member of the Trilateral Committee (with the Israelis and Palestinians) in dealing with the political and technical issues related to water. Through the year 2001, results of USAID's program will include: a 10% increase in domestic consumption rates, up to 6% of agricultural and industrial needs being met with non-potable water sources, and 100% recovery of operation and maintenance costs.
Mission Strategic Objective No. 3: More Responsive and Accountable Governance. Following the initial establishment of the Palestinian Authority and the 1996 elections, Palestinians must focus on further transition towards self-rule, including the establishment of democratic checks and balances, and the development of accountable and transparent governance. In order to achieve this, a vibrant civil society with an active role in the decision-making process must emerge, the branches of government must develop technical proficiency, constituency outreach and institutional stability, and appropriate management responsibilities must be devolved to entities of local governance. Through the year 2001, results of USAID's program will include: civil society organizations effectively transmitting citizens' concerns to the government and having them incorporated into the public decision-making process; the Palestinian Legislative Council functioning as a representative legislative body by developing responsive and technically sound legislation, and overseeing the work of the Executive; the Executive applying uniform rules and procedures for the development of legislation and policies; and decentralized service provision and control of resources.
Other Donors
At the October 1993 Conference to Support the Middle East Peace Process, donors pledged $2.4 billion in assistance to the Palestinian people. Of the total donor pledge, approximately $1.6 billion had been made available through FY 1997. Given the combination of political and financial resources dedicated to the Palestinian-Israeli peace process, the U.S. Government, the European Union and Norway are considered the lead donors in the West Bank and Gaza.
FY 1999 Program
In FY 1999, USAID intends to finance: 1) lending for small and microenterprises, technical support to small businesses to enhance domestic and export marketing, support for Palestinian industry associations and other business organizations, and policy-related initiatives to improve the efficiency and transparency of commercial transactions ($7 million); 2) development of new water supplies for household consumption, testing and improving the quality of potable water, repairing and installing transmission/distribution and waste/storm water systems, and promotion of more efficient allocation
of all water resources (potable and non-potable) for domestic and commercial uses ($58 million); and 3) enhancement of citizens' capacity to participate in and influence the governing process through their government representatives and civil society organizations, and development of the ability of the public sector (the legislature and local government entities) to better meet the needs of Palestinians in a transparent and efficient manner ($10 million).
ACTIVITY DATA SHEET
PROGRAM: WEST BANK AND GAZA
TITLE AND NUMBER: Expanded Economic Opportunities, 294-SO01
STATUS: Continuing
PROPOSED OBLIGATION/FUNDING SOURCE: FY 1999 $7,000,000/ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001
Purpose: The Palestinian economy is characterized by its high and fluctuating levels of poverty and unemployment and under-employment; limited access to labor markets in Israel and unreliable passage for manufactured inputs and final products, especially in times of border closures; low productivity; constraints to credit, particularly for microenterprises; and an uncertain political environment and undefined legal/regulatory framework that undermine investor confidence. USAID's program addresses these issues, focusing on the private sector as the key to long-term stability and growth in the West Bank and Gaza.
USAID Role and Achievements to Date: In FY 1994, USAID began activities to develop the skills of small entrepreneurs and to generate emergency employment opportunities--especially in Gaza--through infrastructure projects. Since FY 1996, a comprehensive program of support to the private sector has evolved, including initiatives designed to expand financial services available to small and micro-enterprises, increase the industrial sector's access to markets, and enhance the productivity of the industrial sector.
To date, USAID has assisted more than 270 Palestinian enterprises to increase productivity and sales, business skills have been upgraded for 2,800 Palestinian entrepreneurs, 4 leading Palestinian firms have been assisted to become ISO 9000 (international export standard) certified and 8 others are programmed for certification in 1998. USAID assistance sponsored a Palestinian Products Exhibition in Dubai which was instrumental in opening the Gulf region as a market for Palestinian goods, with more than $10 million in initial sales and many additional agreements in process. USAID has financed more than 8,500 micro-loans through UN and NGO intermediaries; a parallel program of micro-finance through commercial banks is underway. USAID technical assistance and infrastructure financing have been critical elements in the establishment of a pilot border industrial estate in Gaza, with first-phase construction completed and manufacturing activities scheduled to begin by June 1998.
Description: USAID's private sector program comprises the following: (1) To improve the access of small and microenterprises to financial products and services, USAID is establishing technical assistance to participating banks and providing working capital loans. This includes UNRWA's small business lending program which has made loans averaging $17,000, as well as $300-$1,000 loans through a US PVO and another UNRWA program. In addition, a formal financial sector micro-credit mechanism has been established, with commercial banks committing $6 million in loan capital and USAID financing technical support and start-up costs. Beginning in 1998, USAID expects two local banks to lend $6 million annually, and possibly increase this level to $10 million annually thereafter. It is also expected that the NGO mechanism will be expanded in FY 1998-FY 1999. (2) To develop new and expanded markets for Palestinian goods and services, USAID is providing market information and supporting industrial zone development. USAID is providing firm-level assistance through a U.S. contractor to meet export standards and promote Palestinian products. USAID is also financing the construction of major elements of the off-site infrastructure at the pilot Gaza Industrial Estate (GIE), as well as expert advice related to security and regulatory arrangements at the Estate and the overall operation of an industrial estate authority. Increased emphasis will be placed on this latter element in FY 1998-FY 1999. Furthermore, USAID may support a new apex organization of Palestinian exporters, to be managed by leading industry representatives from the West Bank and Gaza. (3) To enhance the
productivity of Palestinian enterprises, a U.S. contractor and U.S. PVO provide training for small businesses in entrepreneurial skills and appropriate technologies. The second phase of this assistance, including its market access component, will be initiated in FY 1999. (4) To encourage an appropriate policy environment for private sector development, in FY 1998 USAID will initiate activities to modernize the accounting profession and will consider other options to enhance equity capital mobilization.
Host Country and Other Donors: USAID has been the lead donor in providing private sector support, chairing the related Sectoral Working Group of the Local Aid Coordinating Committee. The European Union and the UK have funded programs providing loans to small businesses, excluding microenterprises. Along with USAID, the World Bank is providing assistance for joint Israeli and Palestinian efforts related to industrial zone development, and the International Finance Corporation is providing financing for private sector development of the on-site infrastructure. The World Bank is planning an initiative focused on improving the private sector legal framework and commercial regulations.
Beneficiaries: Primary beneficiaries of these activities will be the majority of Palestinians working in micro, small and medium-sized firms. More specifically, it is estimated that 150,000 microenterprises will be eligible for loans through USAID-assisted programs, either through capitalization of credit funds or technical assistance/training to establish credit for such enterprises through the formal financial sector. Approximately 22,000 jobs will be created at the pilot Gaza Industrial Estate and up to 40,000 jobs in feeder industries, with the expectation that significant levels of employment will be generated through successor projects. The development of an appropriate policy framework through USAID and other-donor support will have a broad impact the Palestinian economy.
Principal Contractors, Grantees, or Agencies: USAID is implementing activities through U.S. firms (Development Alternatives International, Metcalf & Eddy and Chemonics), U.S. NGOs (the Save the Children Federation and the YMCA), and the Palestinian private sector.
Major Results Indicators: While all indicators of success for the USAID/West Bank and Gaza program depend on the peace process, indicators in this sector are particularly sensitive to the level of access Palestinian goods and labor have to Israel. In the event of frequent/lengthy border closures and political instability, USAID's initiatives will mitigate the negative impact on the Palestinian economy, but established targets will not be achievable. Through the year 2001, indicators of USAID's success will include: annual increases in employment levels of 8%, an increase in daily wages from approximately $16 in 1996 to $21.60 in 2000, and 5% annual increases in exports by assisted firms.
ACTIVITY DATA SHEET
PROGRAM: WEST BANK AND GAZA
TITLE AND NUMBER: Greater Access to and More Effective Use of Scarce Water Resources,
294-SO02
STATUS: Continuing
PROPOSED OBLIGATION/FUNDING SOURCE: FY 1999 $58,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001
Purpose: USAID will address the problem of the inadequate quantities and substandard quality of water available for domestic consumption in the West Bank and Gaza, to include the related issues of inappropriate waste/storm water collection/treatment and the inefficient allocation of water resources. In addition to the health and environmental impacts of USAID's program, its rationale derives largely from the constraints on economic development posed by the current water situation.
USAID Role and Achievements to Date: Early in FY 1995, USAID began to finance efforts to rehabilitate, and later to upgrade and expand, the waste and storm water systems in Gaza City. Since the signing of the Interim Accords in September 1995, USAID has worked with the Palestinian Water Authority (PWA) and the Palestinian-Israeli Joint Water Committee (JWC) to support the water aspects of those accords. In addition to ongoing waste/storm water activities in Gaza, this has entailed the design and implementation of a series of initiatives to develop new water supplies for household consumption, test and improve the quality of potable water, repair and install transmission/distribution systems, and promote more efficient allocation of all water resources (potable and non-potable) for domestic and commercial uses.
To date, the emergency phase of USAID's waste/storm water initiative in Gaza City has been completed, with approximately 50 kilometers of sewer lines and stormwater culverts cleaned, repaired or replaced, a critical pump station/reservoir renovated, and a central drainage area dredged. As a result, flooding and sewage overflow has been reduced in surrounding sections of the City. This work also represents the first step in a longer-term, multi-donor construction program that is now underway, based on the waste and storm water facilities master plan for Gaza City developed in 1997 under a USAID contract. Furthermore, 39,000 residents in four of the poorest sections of Gaza City have benefited from a neighborhood upgrading program, incorporating water infrastructure improvements, community awareness and health interventions. In the West Bank, water distribution systems in 27 communities have been upgraded, and the first phase of similar work in Hebron has been completed. When work in several additional villages and subsequent phases in Hebron are completed later in 1998, these activities will have resulted in approximately 260,000 Palestinians having improved access to potable water. Designs have been finalized for and construction is scheduled to begin in early 1998 on four production wells, five or six monitoring wells, transmission systems in Jenin and Hebron-Bethlehem, and distribution systems for 11 Jenin-area villages.
Description: USAID's water program comprises the following: (1) To increase the quantity and quality of potable water, USAID is supporting the development of new wells, the upgrading and extension of water transmission and distribution systems, and the monitoring of water quality. This includes improvement of village water distribution systems in the West Bank, and a major contract for overall planning, design and construction of wells and water networks. Through the latter, 6 million to 8 million cubic meters per year of water will be made available, with a transmission capacity to handle additional future supplies. FY 1998-FY 1999 initiatives will include the construction of additional distribution systems and the establishment of community-based management structures in these Jenin-area villages, as well as further well development. (2) To promote integrated water management practices, USAID is financing activities to collect, treat and reclaim wastewater and stormwater, develop alternative supplies (e.g., brackish water and desalination), and institute conservation and loss prevention measures. Through a U.S. firm, construction is underway in Gaza to more than double the capacity of the existing wastewater treatment plant, expand a storm water reservoir, develop a pilotstormwater infiltration scheme, and construct pump stations/force mains and sewer lines. In addition, in FY 1998 USAID will initiate support to improve the management of the Gaza Coastal Aquifer in order to prevent its further deterioration as a source of safe drinking water, including the exploration of options such as desalination, recharge of aquifers, reuse of treated water and loss-prevention/conservation. In FY 1999, USAID also intends to initiate a similar aquifer protection program, including wastewater activities, in the West Bank. (3) To establish market-oriented allocation mechanisms, USAID is enhancing the capacity of Palestinian organizations to carry out long-term planning and enact policies that account for the economic, social, health and environmental implications of water use. These efforts are incorporated in the ongoing activities cited above. In FY 1998-FY 1999, USAID expects to focus on issues such as the enactment of tiered-tariff structures based on water quality and use, as well as the capacity of municipalities, utilities and users groups to manage water resources.
Host Country and Other Donors: Because of the significant level of USAID financing ($255 million from FY 1996-FY 2000) and the political involvement of the U.S. Government, USAID is considered the lead donor in the sector. Reflecting the urgency of addressing the wide range of issues relating to water shortages in the West Bank and Gaza, through 1996 donors had committed approximately $350 million to water activities, with Germany, Norway, Sweden, the European Union, Japan, Italy and the World Bank being the most active. Other donor financing for wells, sections of water networks, emergency treatment plant repairs, sewage systems, and operational support have been integral to each USAID water initiative.
Beneficiaries: All Palestinians in the West Bank and Gaza will benefit directly or indirectly from USAID's efforts to increase supplies and improve management of water resources. USAID support for the development of wells and transmission/distribution lines has been focused initially in the Bethlehem-Hebron and Jenin areas, with technical support also provided in Nablus, Ramallah and Jericho. Financing for storm/waste water activities has been concentrated in Gaza City. However, system-wide improvements resulting from USAID's water program will enable Palestinians in general to better meet their water needs in a sustainable manner.
Principal Contractors, Grantees, or Agencies: USAID is implementing activities primarily through U.S. firms (Camp, Dresser & McKee, and Metcalf & Eddy are the two prime contractors), with U.S. private voluntary organizations (the Save the Children Federation, Catholic Relief Services and American Near East Refugee Aid) also playing significant roles.
Major Results Indicators: Indicators of success through the year 2001 will include: a 10% increase in domestic consumption rates, up to 6% of agricultural and industrial needs being met with non-potable water sources, and 100% recovery of operation and maintenance costs.
ACTIVITY DATA SHEET
PROGRAM: WEST BANK AND GAZA
TITLE AND NUMBER: More Responsive and Accountable Governance, 294-SO03
STATUS: Continuing
PROPOSED OBLIGATION/FUNDING SOURCE: FY 1999 $10,000,000/ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001
Purpose: Through its programs, USAID is responding to the need to rapidly establish a functioning and accountable system of self-governance in the West Bank and Gaza. Related issues that USAID is addressing include limited citizens' input into the decision-making process, nascent government structures especially those related to constituent representation, unclear allocation of roles and authority among and within the various branches and levels of government, and inadequate guarantees and exercise of basic freedoms.
USAID Role and Achievements to Date: USAID's FY 1995 and FY 1996 support for the first Palestinian elections, which led to the election of the Palestinian Legislative Council (PLC) and the head of the Executive Authority in January 1996, provided the basis for its current democracy and governance portfolio. Activities are designed to strengthen the active participation of citizen groups in the governing process through their government representatives and civil society organizations, and to develop the capacity of the public sector (including the executive and legislative branches, as well as local government) to meet the needs of Palestinians in a transparent and efficient manner.
USAID's activities to date have resulted in a series of town hall meetings allowing constituents to express their concerns to PLC, Executive and local government representatives; the collection of public input on draft laws through the use of the internet; the establishment of a citizens' rights center in the West Bank; new mechanisms in a pilot sector (health) to allow the Ministry and non-governmental organizations to jointly develop a policy agenda and allocate responsibilities for service provision; and civic education sessions targeting rural populations and women. With the PLC, USAID has helped establish procedures for record-keeping and tracking the growing number of constituent inquiries, installed equipment to record votes and produce verbatim transcripts of proceedings, provided assistance in the review of draft laws (e.g., those related to the judiciary, political parties, the Basic Law, the civil service law), financed a parliamentary research unit to provide objective, non-partisan analysis and information, supported Executive oversight mechanisms--including review of the Executive's budget, and televised PLC plenary proceedings to increase citizen awareness of the PLC's activities. With the Executive, USAID has developed procedures for the review of legislation and established a unit focusing on the qualitative technical review of draft laws and policies.
Description: USAID's democracy and governance program includes the following interrelated components: 1) To increase the participation of civil society organizations in public decision-making and government oversight, USAID is supporting the development of non-governmental organizations, strengthening their capacity to exercise government oversight, policy analysis and advocacy roles, enhancing the skills of the media, and encouraging the dissemination of information to the public. These programs are conducted through the United States Information Agency (USIA) and local and international non-governmental organizations, which currently include five local civil society organizations and three international organizations partnered with local groups. FY 1998-FY 1999 initiatives will include an increased emphasis on Gazan civil society organizations, which tend to be less developed than those in the West Bank. 2) To enhance the capability of the newly elected Palestinian Legislative Council to perform functions of a legislative body, USAID is supporting the development of key administrative systems, increasing the PLC's ability to draft and review legislation, enhancing their skills in reviewing and monitoring the Executive's budget and overall performance, and providing assistance to improve PLC responsiveness to its constituents. These programs are implemented by a U.S. contractor and a U.S. grantee. 3) To increase the effectiveness of the Executive Authority's legislative and policy-making process, USAID is providing targeted support to establish a transparent
process for developing, drafting and reviewing policies and legislation, which includes public input and legal and technical review. This support is being provided by a U.S. contractor, and will be completed in FY 1999. 4) The extent and nature of USAID's support to establish a foundation for decentralized local government will be determined in FY 1998. Work to date has focused on the analysis of revenue generation capabilities, the legal framework for local government operation, and the feasibility of devolving certain key functions from the central to the local level.
Host Country and Other Donors: Although many donors have indicated interest in supporting programs in the democracy and governance area, USAID has been a leader in the design and provision of assistance, especially in the area of civil society. The World Bank, the UK and Australia are supporting initiatives related to legal reform and the justice sector, which complement the areas in which USAID is working. The European Union's program of support with the PLC has been developed in coordination with USAID. The World Bank, UNDP and other donors have programs which support the development of local government entities; USAID anticipates working in related policy reform areas.
Beneficiaries: All Palestinians will benefit from the emergence of open, transparent and effective self-rule mechanisms.
Principal Contractors, Grantees, or Agencies: USAID is implementing activities through U.S. contractors (primarily Associates in Rural Development and Checchi/PalTech), U.S. non-governmental organizations (the International Republican Institute, the National Democratic Institute and Internews) partnered with local organizations, and grants to local non-governmental organizations. USAID is working with USIA on media activities.
Major Results Indicators: By the year 2001, USAID expects that: citizens will have a positive perception of the government's allocation and management of public resources; civil society organizations will play an effective role in transmitting citizens' concerns to the government and having them incorporated into the public decision-making process; the PLC will be fulfilling the functions of a representative legislative body by developing responsive and technically sound legislation, and overseeing the work of the Executive; uniform rules and procedures will be in effect for the development of legislation and policies in the Executive; and service provision functions and control of resources will begin to be decentralized to local entities.
WEST BANK AND GAZA
FY 1999 PROGRAM SUMMARY
(in thousands of dollars)
Encouraging Economic Growth Stabilizing Population Growth and Protecting Human Health Protecting the Environment Building
DemocracyProviding
Humanitarian Assistance
TotalUSAID Strategic
Objectives1. Expanded Income Opportunities
-ESF
7,000
7,000
2. Improved Access to Extremely Limited Water Resources
- ESF
58,000
58,000
3. Improved Key Democratic Practices and Processes
ESF
10,000
10,000
TOTAL
ESF
7,000
58,000
10,000
75,000
USAID Mission Director: Christopher D. Crowley
Footnote: 1 The program described does not reflect the possibly higher funding levels under discussion, for which plans are not yet completed; details on the expanded program will be provided if and when approved.
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